Thread by @prettyoldladyhk

It was a sad week but it doesn’t stop me from exploring #NansenQuery 👊💪🏼
I am still pretty new to crypto and decided to explore #NansenMultiChainData! Let’s check out the utility of multi-chain in this thread. 🔎🧵
💣Spoiler: I made money in my simulation

1/ ✍️Nansen researcher put multi-chain data to test. We found that the more assets are bridged over to new chains / L2s, the higher the demand for the underlying chain token and the fundamental value of native chain token.

2/ In other words, the higher amount of tokens bridged over to to new chains or to L2s, the stronger the support of the native chain token’s price.📈
Read for more: nansen.ai/research/money…

3/ We put together the above thanks to Nansen’s multi-chain labels. In terms of metrics, we compared:
1️⃣ Net USD bridge flows (e.g. $1 million bridge over to Polygon)
2️⃣ Net number of bridge depositors (e.g. +52 addresses bridge over to Polygon)
3️⃣ Only buying ETH

4/ Research shows that by investing into the top 3 tokens with the most amount of flows (both dollar wise and no. of users), the simulated portfolio performed much better than buying ETH. That’s what I was told but obviously, I have to test it!!🤓 How I test below.

5/ The market was really volatile in the past year so I want to put the theory to test. Let’s see if I were to invest $100 on 30 Mar 2021, how much would have I gained/lost a year later. Would I ride out the storm or would I have to move back with my parents?

6/ Using Nansen Query, we can extract and rank top 3 new chains/ L2 tokens for these 2 strategies:
1️⃣ Net USD bridge flows
2️⃣ Net number of bridge depositors
Then we compare the two strategies with just
3️⃣ only buying ETH

7/ We invest into the top 3 coins daily for strategy 1 and 2 and look at the signal daily. Looking at the 1st month, only investing $100 in ETH would get 52% return; while if we follow net USD flow bridge chg. and no.of chg in bridge depositors, we get 150% and 114% respectively

8/ ETH dropped from $4182 to $1794 between 12 May - 21 Jul 21. Did our 2 strategies stay resilient during the downturn? Result shows if I were to invest $100 in ETH on 30 Mar 2021, my portfolio had -1.25% return while the 2 strategies would still give me 100%+ return

9/ 🤔One can argue that it was just pure luck both strategies following bridge flow to new chains / L2 outperform holding ETH during downturn. Let’s look at the results if we test 6M and 1Y data.

10/ For a 6M period, if we follow net USD flow bridge change and no.of change in bridge depositors, my portfolio grew 1586% and 2179% respectively. If I were to only invest in ETH, then my portfolio grew 57%

11/ For a 1Y period, my portfolio grew 3449% and 22,151% respectively following bridge flow. If I were to only invest in ETH, then my portfolio grew 83%

12/ One important thing to note is that my testing does not consider gas and trading fees. Therefore, return can be significantly lower if I were to trade 3 different tokens daily. We can see that following net bridge depositors is the most effective strategy. 🤯

13/ One can also look at the signal less frequently e.g. weekly, to cap the number of trades.

14/ With Nansen Query, you can easily rank top 3 new chain / L2 tokens daily to rebalance your position accordingly. This thread is not financial advice. Nansen research used on-chain raw data to surface trading signals to help #quant or #trading team.

14/ Please feel free to reach out for full research!
#AVAX #MATIC #Optimism #Arbitrum #FTM #crypto #bridging #datascience #research #trading #quant #Ethereum #nansen #TradingSignals